Illinois Tool Works (ITW) Q4 2002 earnings summary

Executive summary

• FY 2002 revenue rose 1.9% to $9.468B and operating income increased 15.3% to $1.506B; income from continuing operations grew 16.1% to $931.8M.

• Reported net income was $712.6M, including a $221.9M after-tax cumulative impairment charge from adopting SFAS 142; diluted continuing-operations EPS was $3.02.

Financial highlights

• Revenue was $9.468B versus $9.293B in 2001; operating income was $1.506B versus $1.306B.

• Income from continuing operations was $931.8M, or $3.02 diluted EPS, versus $802.4M, or $2.62, in 2001.

• Net income was $712.6M versus $805.7M in 2001, reflecting the $221.9M after-tax SFAS 142 cumulative charge.

• Operating income growth included a 6.4 percentage-point contribution from ending goodwill and indefinite-lived intangible amortization.

Outlook and guidance

• FY 2003 income from continuing operations forecast at $3.02-$3.42 per diluted share.

• Free operating cash flow expected to cover debt service, dividends, internal growth, small- to medium-sized acquisitions and additional investments; dividend payout objective is 25-30% of the prior three years' average net income.

• Pension expense expected to increase $15M in 2003, primarily due to a lower discount-rate assumption.

• Florida Tile sale was intended for 2003; the estimated $2.4M after-tax disposal gain remained deferred pending completion.